Buying real estate is a significant step for many people, requiring substantial capital investments. When searching for an apartment or house to purchase, buyers often focus on their savings and the possibility of obtaining a loan. However, they frequently overlook the fact that, in addition to the property’s price, they will also need to pay considerable additional costs, known as Nebenkosten Immobilienkauf. These costs can amount to approximately 10–13% of the property’s value, as illustrated in the accompanying (see diagram 1).
Types of Additional Costs
All additional costs can be divided into two groups:
- Mandatory Costs – Required for all transactions.
- Optional Costs – Arise when additional services are needed or requested by the buyer.
Mandatory Additional Costs (Approx. 10% of Purchase Price):
- Real Estate Transfer Tax (Grunderwerbsteuer) – 3.5% of the purchase price.
- Land Registry Registration Fee (Grundbuch-Eintragungsgebühr) – 1.1% of the property’s value.
- Notary or Legal Fees (Notar- oder Rechtsanwaltskosten) – 1.5–3% of the property’s value + 20% VAT.
- Real Estate Agent Commission (Maklerprovision) – 3% + 20% VAT.
Optional Additional Costs:
- Bank Fees (if buying with a mortgage) – Includes a 1.2% fee for registering a mortgage in the land registry, plus a bank administrative fee (0.5%–2% of the loan amount).
- Property Insurance (Versicherungen) – Highly recommended but not mandatory. Costs range from €200 to €800 per year, depending on the property.
How to Reduce Additional Costs?
Since additional costs make up a significant sum, many buyers wonder how to minimize them. Avoiding the Land Registry Registration Fee (Grundbuch-Eintragungsgebühr) is usually not possible because the new owner must be registered in the land register. However, reductions are possible in cases of free property transfers between close relatives or when ownership is transferred in smaller increments.
How to Reduce Grunderwerbsteuer (Real Estate Transfer Tax)?
Although the 3.5% tax rate may seem high, Austria’s rate is relatively moderate compared to Germany, where rates vary by state from 3.5% to 6.5% (see diagram 2).
Certain transactions qualify for tax reductions or exemptions:
- Inheritance and gifts between close relatives – A progressive scale applies:
- 0.5% for the portion up to €250,000.
- 2% for amounts between €250,000 and €400,000.
- 3.5% for amounts over €400,000.
- Definition of close relatives includes spouses, children, grandchildren, parents, grandparents, and registered partners. Even unregistered partners who have lived together for more than five years and can prove a shared household may qualify.
- Contributions to a company’s capital – If real estate is transferred into a company’s capital (e.g., GmbH), the tax may not apply.
- Company restructuring and ownership changes – If real estate is transferred through company restructuring or ownership changes, tax may be avoided, provided no single shareholder receives more than 95% of the company’s capital.
- Long-term lease agreements (Erbpacht) – In some cases, these agreements are not subject to real estate transfer tax since ownership does not formally change hands.
Negotiating Other Fees
Although Austria has capped real estate agent fees at 3% + 20% VAT, negotiation is possible. Buyers can also try to negotiate lower legal and notary fees.
Conclusion
Given the complexity of real estate transactions in Austria, consulting a tax advisor before purchasing a property is highly recommended. Professional guidance can help structure the transaction optimally and minimize additional costs.
